India Well-Positioned to Withstand Global Trade Shocks, Says Moody’s

India is better placed than several other emerging economies to weather the impact of US tariffs and global trade disruptions, according to a report released by Moody’s Ratings on Wednesday. The agency attributes this resilience to strong domestic growth drivers and India’s relatively low dependence on goods exports.
The report highlights that key government initiatives, such as policies aimed at stimulating private consumption, enhancing manufacturing output, and accelerating infrastructure investments, will help cushion the economy against slowing global demand. Additionally, falling inflation may open the door for potential interest rate reductions, offering further support to growth momentum. The country’s banking sector also remains robust, with sufficient liquidity to maintain lending activity, Moody’s noted.

"India's sizable domestic market and limited reliance on international trade in goods provide it with a strong buffer against external economic shocks," the report stated.

Addressing geopolitical concerns, Moody’s observed that recent tensions between India and Pakistan are likely to exert a heavier toll on Pakistan’s economy than India’s. The primary economic centres in India are distant from potential conflict zones, and bilateral trade between the two countries remains minimal. However, the report cautioned that a prolonged standoff could lead to higher defence spending, potentially slowing the government’s fiscal consolidation efforts.

The report also pointed out that certain export-reliant sectors, such as the automobile industry with links to the US, may feel some strain from ongoing trade challenges. Nevertheless, India's resilient services sector and its domestic-oriented economy are expected to offset much of this pressure.

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Earlier this month, Moody’s revised India’s growth projection for 2025 down to 6.3 per cent from 6.7 per cent. Despite the downward revision, India is still projected to record the fastest growth among G-20 economies.

In April, the United States announced a new round of targeted tariffs, although implementation was temporarily paused for 90 days. While the general base tariff remains at 10 per cent, specific sectors such as steel and aluminium continue to face elevated duties.